When you think about it it's actually kind of simple: the era of Japanese dominance in console games more or less coincides with the era of Japan's rising global economic prominence. Its downfall is probably right in line with the overall downfall of the old Japanese tech giants. Meanwhile over the past 15 years or so China and South Korea have been on the come-up. Both countries pulled ahead of Japan in terms of R&D. As South Korea's economy rises up some of its media is becoming more prominent, PSY probably being the most well-known example, but you also have things like SNSD and especially all the Korean soap operas that have seen moderate success online. South Korean film making got real in the 00's. In gaming, you have the consoles trying hard to break into China, online games (and Hollywood) going after that Chinese money. South Korea is a pillar of Blizzard's business now. I think this background radiation is what was missing from that old Japanicide podcast you guys did.
I want to talk specifically about Silent Hill though, because that's a really unique case. Similar to Metal Gear and Souls, it's actually the result of a blending of western and Japanese sensibilities. Essentially, Silent Hill is a Japanese take on American horror. Or, it's American horror through the lens of Japanese psychology. That's why it stuck over here. Silent Hill 2 in particular was a unique case, maybe even a perfect storm.
The way I hear it, because SH2 was coming along in the shadow of Metal Gear Solid 2 -- Konami's assured blockbuster, Team Silent wasn't under a microscope and had a considerable amount of freedom to do what it did with that game. That is the very definition of a diverse portfolio -- a bigger product covering for smaller products that may or may not stick to the wall. Once SH2 made it big though, it had to be the big game. Team Silent's original plan following SH2 was to actually turn it into an episodic series of unrelated stories surrounding the same time -- the video game equivalent of The Twilight Zone. Truly an idea at least seven years ahead of its time. But, that kind of middle-budget Japan/western mix on consoles does not have a good chance in today's Japanese economy as Konami interprets it. Konami right now is relying entirely on the known quantities that are Metal Gear and Pro Evolution Soccer.
Companies like From Software and Atlus look like almost the only ones that have been able to keep up the medium-size-but-sustainable model of games with a degree of international appeal. I don't know. In some ways I see that same spirit emerging in Eastern European developers as some of them finally start to stretch out after emerging from the Soviet bloc. Maybe in a few years you'll be able to add Brazil to the discussion of China's and Korea's rising prominence in this industry. the Brazilian consumer base is already significant. In general I wouldn't be surprised if in the coming years or decades we saw significant gaming-related things coming from the BRIC nations.